Taxpayer to foot the substantial bill for Prudential AIA bid

By SIMON DUKE FOR MAILONLINE
Updated: 18:05 EST, 9 August 2010

Prudential is expected to palm off part of the cost of its aborted £24bn bid for Asian rival AIA on to the UK taxpayer.

The embattled insurer will seek to offset a chunk of its estimated £400m costs for the failed takeover tilt against its tax liabilities, City sources said.

It means the Pru could end up paying the taxman tens of millions less than it would otherwise have done had its planned swoop on AIA not collapsed in June.

UK taxpayers could end up paying the price for Prudential's aborted bid on AIA

Boss Tidjane Thiam will outline his plans to mitigate the eye-watering cost of his Asian misadventure when the British insurance giant unveils half-time results on Thursday.

The under-fire chief executive is tipped to reduce his loss estimate from £450m to below £400m after persuading his highly-paid financial, legal and PR advisors to lower their fees.

But it remains a moot point how much the Pru can shave from the final bill. Getting sharp-clawed investment bankers to accept less money is like ‘asking the devil only to take half a soul’, one leading Pru investor told the Mail.

It is understood the life and pensions giant has also limited further potential losses on the volatile exchange markets after closing out a complex derivatives contract last month. Following bumper results from arch rivals Legal & General (up 3.15p to 90.25p) and Aviva (8.3p higher to 390.1p) last week, Thiam is under growing pressure to show that the AIA debacle has not distracted him from the day-to-day running of the group.

For this reason, the Pru will look to emphasise an expected healthy rise in operating profits - before the ‘exceptional’ cost of the AIA swoop is taken into account.

But this presentational ploy is unlikely to assuage the many investors still seething over the AIA losses, which are equivalent to one year’s worth of dividend pay-outs.

There remain a hardcore of major investors agitating for big changes in the boardroom, calling for either Thiam or chairman Harvey McGrath to fall on their swords.

‘What mandate does the current team have to run this company,’ asked one City analyst.

‘The fact is they’ve spent a lot of money pursuing an acquisition that shareholders didn’t want at completely the wrong price.’

The Pru was forced to pull out of its agreed bid for AIA after failing to win the backing of its investors. The Pru (up 14p to 585.5p) declined to comment.